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Innovation in Focus | The Age of Trade Lifecycle Optimization in Securities Trading

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21 August 2013

Moving from Theory to Practice

Abstract

Trade lifecycle optimization (TLO) is a conceptual framework for addressing challenges and opportunities across the front, middle, and back office of securities trading, operations, and IT. The Age of TLO could take several years to dawn. To achieve full trade lifecycle optimization, firms will have to align their strategic business goals with technology enablers.

In an Innovation in Focus report, The Age of Trade Lifecycle Optimization: Moving from Theory to Practice, Celent defines and describes the innovative concept that some firms are using to reshape their trading technology and operations. Celent believes TLO offers more informed decisions, which lead to multiple levels of improvement, including trading efficiency, collateral efficiency, and clearing and settlement efficiency.

Proponents of TLO include vendors, who have extensive solutions, and some senior executives in the industry, who see the potential to reshape securities trading due to cost and capital constraints, high capacity, and lack of an integrated approach for IT and operations.

“TLO is really reached via building blocks rather than a single approach,” says David Easthope, Research Director with Celent’s Securities & Investments Group and coauthor of the report. “Although still conceptual, Celent believes early adopters of TLO may be able to gain competitive advantage in operational efficiency and trading performance.”

Buy and sell side firms will have to utilize and retain a number of different technology platforms. “Celent believes that certain vendors exceed others in different segments of the trade lifecycle,” says Medy Agami, analyst and coauthor of the report. “While these types of vendors all have various pieces of the puzzle, none complete it.” As we move closer to the age of TLO, Celent believes that technology tools in greater demand will include high performance hardware and software, integration services, order and execution management systems, portfolio management systems, front office analytics and predictive tools, collateral optimization tools, and other specialized third party software.

This report contains three figures and one table.